Voda tax settlement likely to include penalty or interest waiver

The government and Vodafone may finally arrive at a settlement in the Rs 20,000 crore tax case, which may include a penalty or interest waiver, reports CNTV18'sAakansha Sethi.

The Central Board of Direct Taxes has powers under Section 119-2B to waive off the interest. A similar settlement was made between Revenue Secretary and ITC in 2005 when P Chidambaram was the Finance Minister.

However, as of now the government's response to the Vodafone Bilateral Investment Promotion And Protection Agreements (BIPA) notice is pending with the Attorney General who is vetting Section 9 of the retrospective amendment. The Attorney General's response is key to determining the government's action on Vodafone.

Earlier, on 17 April Vodafone had served the government with a notice with its intention to enter arbitration. That dispute notice had said there would be a 3-month negotiation period, which has then lapsed on 17 July.

It has asked for a written undertaking from the government whether it will raise a new demand or not. However, it has not heard back from the government.

The government had earlier formed the Inter ministerial Group to look into the arbitration notice sent by the telecom major under the India-Netherlands bilateral investment protection agreement (BIPA). The Inter ministerial Group haddecided against promising any relief to the company from the controversial retrospective amendments in the income tax law and said that the telecom giant is liable to pay capital gains tax following its acquisition of Hutchinson's stake in Hutch-Essar in 2007.

Following amendment to the Income-Tax Act with retrospective effect, Vodafone may be asked to pay Rs 20,000 crore tax, interest and penalty for its 2007 acquisition despite wining the tax case in the Supreme Court.

Vodafone had requested TDSAT to strike down and quash the impugned decision of the DoT.AFP

In other news, PTI reports that Telecom tribunal TDSAT has dismissed Vodafone's plea challenging the government's guidelines on the liberalisation of 2G spectrum in the auctions following the cancellation of 122 licences by the Supreme Court. However, the company can approach the tribunal again after the guidelines have been finalised.